Iran War Raises Agrochemical Supply Risks For India

Iran War Raises Agrochemical Supply Risks For India

Why in the News ?

The ongoing Iran conflict has raised concerns over fertiliser and agrochemical supply disruptions, even as India holds ample foodgrain stocks and expects a bumper rabi harvest, potentially balancing inflation risks but exposing vulnerabilities in import-dependent agricultural inputs that require stringent environmental clearances and regulatory oversight.

Food Security Cushion and Inflation Outlook:

  • India currently has comfortable foodgrain stocks, with 23.6 million tonnes of wheat and 36.5 million tonnes of rice in government reserves.
  • Compared to previous years, stock levels are significantly higher, ensuring food availability stability.
  • A bumper rabi harvest (2025-26) is expected due to good monsoon rainfall and favourable climatic conditions supporting a pollution free environment for crop growth.
  • Increased acreage under crops like wheat, mustard, maize, pulses, potato, and onion supports higher production.
  • As a result, food inflation pressures remain under control, similar to the situation during the COVID-19 pandemic.

Supply Chain Disruptions in Fertilisers and Agrochemicals

  • The Iran war has disrupted supply chains from the Gulf region, a key supplier of fertilisers and raw materials that must comply with environmental impact assessment protocols.
  • Imports of urea, DAP (Di-Ammonium Phosphate) and inputs like ammonia, sulphur, and natural gas are affected, particularly through coastal regulation zone facilities.
  • Prices have surged:

○   Ammonia: $450–470 → $725–750 per tonne

○   Sulphur: <$200 → $700+ per tonne

○   DAP: ~$650 → $825 per tonne

  • Around 55–60% of global naphtha supply (key for agrochemicals) is linked to West Asia, making it vulnerable.
  • Rising input costs also increase prices of pesticides, herbicides (e.g., glyphosate) and even packaging materials (30–40% rise).

 

About Fertiliser Use, Imports and Policy Concerns:

●  India annually consumes about:

○   40 million tonnes urea

○   10 million tonnes DAP

○   14 million tonnes complex fertilisers

○   5 million tonnes SSP (Single Super Phosphate)

●  India is heavily dependent on imports for fertilizer inputs, making it vulnerable to global shocks, necessitating robust environmental clearance frameworks for domestic production facilities.

●  The Strait of Hormuz is a critical chokepoint for supply of crude oil and petrochemicals used in fertilizer production.

●  The government provides nutrient-based subsidies (NBS) to ensure affordability for farmers, following the polluter pays principle and precautionary principle in environmental jurisprudence.

●  Policy focus should be on:

○   Promoting balanced fertilisation while ensuring compliance with EIA notification requirements

○   Boosting domestic production of complex fertilisers and SSP through proper environmental clearances, avoiding ex post facto or retrospective environmental clearances as highlighted in the Vanashakti judgment

○   Improving nutrient-use efficiency while adhering to Forest Conservation Act provisions and promoting environmental democracy in decision-making processes